Saturday
July 28
2012

Scott Anderson

Weekly Roundup: What Tata Would Have Done Differently : In an Interview, Ratan Tata Says the Company Has Not Been Innovative Enough in Reaching the BoP

In a 2007 interview with BusinessWeek, Ratan Tata wasn’t entirely satisfied with his company’s progress in reaching the Base of the Pyramid customer.

“We have not been so successful. We have been trying to reinvent products. But we haven’t reinvented the businesses, which is something we need to do. We should look at different ways of marketing these products,” he said. “With the (Nano), for example, we are looking at selling through stand-alone services guys who may act like insurance agents—operating on their own, using satellite service stations.”

Five years later, Ratan Tata will be stepping down as chairman of Tata Sons Ltd. As he says his goodbyes before his retirement in December, the already candid executive seems to be even more forthcoming about what his company has done right and what it has done wrong.

In an interview with Charlie Rose that aired on July 6, he was asked if there is anything the multinational, which has surged from around $10 billion in revenue when he took the reins 1991 to around $100 billion today, has fallen short in achieving. Ratan Tata replied:

“We have not been able to touch the levels of the population as we have hoped. The Nano is one example, but serving the bottom of the pyramid for India and thinking of how to make products that are affordable to that segment of the population – I think that’s a real challenge. We haven’t…succeeded in being innovative enough to do that..”

Rose does not linger on the subject to ask follow-up questions about what specifically the conglomerate could have done differently. But earlier in the interview, Ratan Tata says: “Internally, I have not been able to create an open, flat and transparent organization. I think we haven’t been able to succeeded in embracing the customers as we could, although we have moved in that direction (from being) a manufacturing company in a seller’s market.”

As for his future, Ratan Tata says rural development, water conservation and child nutrition – the latter two he considers India’s greatest challenges – will the focus of his post-corporate life. For instance, he said four fifths of all Indian rainwater runs off into the sea and the country is increasingly consuming underground water for agriculture. This is an especially critical point considering rainfall for this year’s monsoon has been dramatically low.

“My most visible goal is to do something in nutrition (for) children in India, and pregnant mothers,” he said. “Because that would change the mental and physical health of our population in years to come.”

The $2,000 Tata Nano, which by most accounts is a market failure, is also seen as a victory for experimentation; a large-scale effort to bring relatively safe and affordable vehicles to the low-income customer that we will be studying and learning from for years to come. And the jury is still out on many other efforts to reach the BoP customer, including Tata’s Swach filter, the $700 home, and the NourishCo business, a joint venture Tata formed PepsiCo. That venture recently introduced products such as Tata Plus Water, fortified bottled water sold at Rs 16 (US 29 cents). The Tata Gluco Plus, a glucose drink at Rs 6 (US 11 cents) offered for lower-income consumers, and Iron Chusti, an enriched snack in Rs 2-sachets, are other products recently released in the JV.

The jury is still out on those products. But Ratan Tata should be commended for creating a culture that put them in motion, and for his transparency in openly critiquing his company’s progress. It will be up to his successor to continue the innovative leadership Ratan Tata has begun.

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